Large one time gift (tax free)
Discussion
I'm after some advice, there is a reasonably wealthy member of my family who is in her late 80s and wants to distribute a portion of her estate to her children while she is still alive. We are aware that there is an annual tax free route but the amount (I believe to be £3k) is way to small. Is there any routes that she can pursue that will allow her to gift say £50k per year to each child without too much tax penalty?
As people have been dying since the beginning of time, I think the government have had chance to cover themselves for anyone wanting to do this. As already said, if she lives for 7 yrs after gifting then its inheritance tax free. It's a sliding scale over the seven years, with more tax to be paid in year 1 than in year 7.
Other way is a trust fund etc.
Local councils will turn over every stone if she's admitted into a care home anytime, and I believe they can ask for these 'gifts' to be paid back to them.
Other way is a trust fund etc.
Local councils will turn over every stone if she's admitted into a care home anytime, and I believe they can ask for these 'gifts' to be paid back to them.
I would be very wary of trusts and the costs involved.
The simplest and most obvious way is to just gift the money without reservation. As mentioned, this is fine and the IHT liability will reduce over 7 years to zero if she lives to 87.
EDIT: I doubt very much that the council or anyone else can ask for a gift to be returned if it is a genuine gift. if you 'give' someone the money and say it isn't really theirs, and you might need it back at some point, then it isn't a gift in the first place.
The simplest and most obvious way is to just gift the money without reservation. As mentioned, this is fine and the IHT liability will reduce over 7 years to zero if she lives to 87.
EDIT: I doubt very much that the council or anyone else can ask for a gift to be returned if it is a genuine gift. if you 'give' someone the money and say it isn't really theirs, and you might need it back at some point, then it isn't a gift in the first place.
Depends on the Council really some are investigative others are not.
But broadly they are not forensic accountants and have neither the time nor the resources.
Other aspect to this is to consider transferring the ownership of the property to the children instead with her retaining a life interest in possession but this is quite complex and advice should be taken depending on a number of factors.
But broadly they are not forensic accountants and have neither the time nor the resources.
Other aspect to this is to consider transferring the ownership of the property to the children instead with her retaining a life interest in possession but this is quite complex and advice should be taken depending on a number of factors.
You need to be aware of chargeable lifetime transfer tax.
https://uk.practicallaw.thomsonreuters.com/8-383-4...
https://uk.practicallaw.thomsonreuters.com/8-383-4...
CharlesElliott said:
I would be very wary of trusts and the costs involved.
The simplest and most obvious way is to just gift the money without reservation. As mentioned, this is fine and the IHT liability will reduce over 7 years to zero if she lives to 87.
EDIT: I doubt very much that the council or anyone else can ask for a gift to be returned if it is a genuine gift. if you 'give' someone the money and say it isn't really theirs, and you might need it back at some point, then it isn't a gift in the first place.
She is already in her late eighties.The simplest and most obvious way is to just gift the money without reservation. As mentioned, this is fine and the IHT liability will reduce over 7 years to zero if she lives to 87.
EDIT: I doubt very much that the council or anyone else can ask for a gift to be returned if it is a genuine gift. if you 'give' someone the money and say it isn't really theirs, and you might need it back at some point, then it isn't a gift in the first place.
LeadFarmer said:
Local councils will turn over every stone if she's admitted into a care home anytime, and I believe they can ask for these 'gifts' to be paid back to them.
She has a sizeable private pension which will easily cover full time nursing care and she owns a house which would not be part of the above mentioned gifts According to https://www.gov.uk/inheritance-tax/gifts
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
If she were to keep the combined gifted amount to below £325k does that mean inheritance tax would not be charged?
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
If she were to keep the combined gifted amount to below £325k does that mean inheritance tax would not be charged?
This
Not this
Simpo Two said:
Seek proper advice.
lots of options, limited ability to avoid tax. At age 80 a case of limiting the cost due to lesser life expectancy. Regular gifts are more problematic than one big gift, unless its gift from truly excess income (not spending capital to gift away income). Not this
Simpo Two said:
Gift & Loan Trust?
The gift will remain in the estate so its one of the worse options, and there is no mention that access to the capital is required.bobfather said:
According to https://www.gov.uk/inheritance-tax/gifts
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
If she were to keep the combined gifted amount to below £325k does that mean inheritance tax would not be charged?
According to the example in that link, it's only if she exceeds £325k."People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
If she were to keep the combined gifted amount to below £325k does that mean inheritance tax would not be charged?
bobfather said:
According to https://www.gov.uk/inheritance-tax/gifts
"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
If she were to keep the combined gifted amount to below £325k does that mean inheritance tax would not be charged?
As I understand it:"People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death."
If she were to keep the combined gifted amount to below £325k does that mean inheritance tax would not be charged?
Assuming it was the only Inheritance, yes.
If she dies and leaves them the house + other monies, the children would be taxed on anything above the 325k limit.
so lets say 2 children, total of 100k gifted. No tax to pay.
The lady then passes away, leaves £300k house and £150k in money within 7 years, total is 100 + 300 + 150 = 550k, tax due on 225k of that.
The limit might not be 325k though, if the lady was married and the husband passed away and she inherited everything from him, she also inheirts his 325k allowance, so it becomes 650k, thus in the above example there is no tax to pay.
https://farewill.com/articles/what-is-the-inherita...
As ever, you probably need to seek professional advice.
Gassing Station | Finance | Top of Page | What's New | My Stuff